Last week, this space mentioned the difficulty that small companies have in gaining “sponsorship,” or the backing of a brokerage and the recognition of institutional investors.

So it was with interest that I read a release that Fairfax, Va.-based Xybernaut Corp. rented luxury suites at the Infiniti Open tennis match, which opened at UCLA on July 21, for the express purpose of entertaining money managers, brokerage types and others.

Xybernaut, which went public a year ago, describes itself as a designer and marketer of “body-worn, hands-free computer-based information systems.”

In a nutshell, these are voice-activated computers worn around the waist. Users wear a “head-mounted video-screen,” according to a company spokesman. The screen can flip up or down and covers only one eye, leaving one free.

Beverly Hills-based investor relations firm Alan Stone & Co. organized the festivities at the tennis match. “We want to introduce Xybernaut to investment bankers, money managers and others in the Los Angeles financial community,” Stone said.

Stone has his work cut out: Xybernaut went public at $5.50 a share last July, then rocketed to $12 a share within days. Since then, it has plunged to as low as $1.50, before climbing up to $2.50 a share in trading last week.

With a track record like that, any company would seek the stability that sponsorship can bestow.

Merger mania?

Last year I said that 1996 was the year of “corporate merger mania.” Now I have to take that back. Last year, although all-time records were set, was just a warm-up.

This year we are really in merger mania.

In the first six months of 1997, there were 3,641 corporate deals announced nationwide, up 38.5 percent from the like period a year ago, according to Mergerstat, a division of Century City-based investment bank Houlihan Lokey Howard & Zukin.

In dollar terms, the number of deals done is up 31.6 percent, to $282.4 billion, compared with last year’s first half.

The average price-earnings ratio (the acquisition price divided by company annual earnings ) paid was 28.1, up a bit from last year. The average “premium” paid (the percent above market price before a deal is announced) was 36.1 percent in the first half, also a little bit above last year.

There are so many mergers going on that even those in the M & A; business say there is fad element. “By now, (business owners and executives) are merging because their friends did it,” said Scott Adelson, Houlihan Lokey mergers and acquisitions expert.

Barbie

Apparently, there was little fallout at El Segundo-based toymaker Mattel Inc. from a July 7 Wall Street Journal cover story that described harsh working conditions at a Barbie doll plant in mainland China.

Three former employees of the plant, in Guangdong province, described 12-hour days with minutes off for lunch, and one day off a month if one were “lucky.” No overtime was paid, according to the workers. Food and housing were poor 12 women to a room, in employer-provided housing.

At Mattel, spokesman Glenn Bozarth said that to his knowledge, no shareholders or shareholder groups have called to complain about the China plant story. Mattel maintains several plants in the Third World, and two in China.

Bozarth said conditions are now more closely monitored at the China plant, and improvements have been made. The stock is near its 52-week high.

Atlantic Richfield

A wallflower at the party on Wall Street has been Los Angeles-based Atlantic Richfield Co., the major integrated oil producer and retailer.

Arco is trading at a tepid 14 times earnings, compared with an average of 25.4 on the Standard & Poor’s Industrial Average (a broad index of industrial stocks).

Arco also offers a dividend yield of 4.3 percent, high by current standards (the average yield of stocks in the S & P; is 1.47 percent).

Researchers at Oppenheimer & Co. Inc. said Arco has been pushed down by weakness in crude prices. But for long-term total return, they like the out-of-favor oil company.

Thanksgiving argument

Years back, as a grade schooler, I informed an uncle over turkey dinner that there would be a crash on the American Stock Exchange, but that Big Board-listed stocks would do okay.

My reasoning then: Bigger, more powerful companies would survive an impending financial crisis, and would wipe out the second-rate stocks on the Amex.

As it turns out, my advice (if implicit) was sound, even if my timing or predictions weren’t: Believe it or not, from Aug. 12, 1982 through July 15, 1997, the NYSE composite has increased by 718 percent, and the Dow Jones by 926.6 percent. But the Amex is up only 436 percent, according to Donaldson, Lufkin & Jenrette Securities Corp.

Why the divergence?

“Over extended periods of time, small differences in annual rates of return can become big differences in total return. For the period (from 1982 to 1997), you are getting an annually compounded rate of 13 percent on the New York vs. 9.8 percent on the American,” answered USC business professor Mark Weinstein.

Money managers said Amex stocks tend to be a bit on the second-rate side.

“What’s wrong are the kinds of companies that list on the Amex,” said Bill Mason, of Cullen Fortier Asset Managment, a Woodland Hills money manager. “The best companies would tend to move off (onto the NYSE). That’s a ‘graduation bias.’ ”

The anti-Amex bias could also reflect the ongoing Wall Street love affair with blue-chip stocks, as evidenced in the stellar performance of the Dow Jones Industrial Average, said Mason. Too, many successful companies, such as Microsoft Inc., are content to stay on the Nasdaq.

Senior reporter Benjamin Mark Cole covers the investment community for the Los Angeles Business Journal